The Benefits of Outsourcing MRO Integrated Supply Chain for Food Manufacturers

The Benefits of Outsourcing MRO Integrated Supply Chain for Food Manufacturers

When RS Integrated Supply first started managing Maintenance, Repair and Operations (MRO) for one US food manufacturer, the client was a fledgling company. “I don’t think they had the infrastructure to manage MRO themselves,” says James Kimmel, a US-based site operations manager for the global provider of outsourced storeroom management and procurement services.

Today, the brand is a national household name, but the partnership continues thanks to the significant advantages that outsourcing integrated supply brings to the food industry.

Familiar challenges

Some of the issues faced by those in the food industry are likely familiar to manufacturers in other sectors too. “All manufacturers are under pressure to keep the plant running as efficiently as possible, reducing costs and maximizing output,” says Simon Hilton, Senior Vice President of Business Development and Marketing at RS Integrated Supply.

“Every sector is being affected by concerns about Environment, Social and Corporate Governance (ESG) too,” he continues. “The carbon footprint of the products they buy is affecting their choices and trends are favoring longer product life and lower energy usage.”

Food production is, however, different to other areas of manufacturing in crucial ways. “The product has a short shelf life,” explains Hilton, “So there is always extra time pressure and the need for a speedy reaction to any events on-site. Food manufacturers are also under financial pressure from the retail industry, and operate on extremely tight margins, so they are more price and time conscious than other industries.”

As a result, external factors that affect the whole economy often hit food manufacturing particularly hard. Take the surge in energy prices and inflation since the onset of war in Ukraine, for example. “The hike in energy prices has had a big effect on this sector,” says Hilton. “Because it created inflation in the marketplace and food is one of those staples where people react to inflationary pressures more than with say luxury goods or pharmaceuticals.”

Industry challenges

The food industry also faces its own specific challenges. In the UK, for instance, recent government legislation restricts the promotion of pre-packaged food that is high in fat, salt, or sugar (HFSS). Manufacturers are, in response, reformulating products so they fall in the non-HFSS category, with breakfast brand Kellogg’s reducing the sugar content of its cereals by 18% and the salt content by 23%.

Such developments, as well as changes in consumer preferences, are driving product innovation. This affects manufacturing methods in terms of both production and packaging. The process for making a pre-made dessert in an individual serving pot, for instance, is different to a multi-serving sachet of the same product in powder form.

In terms of MRO, new equipment typically means new spare parts to accommodate in the storeroom. “There’ll be a change of line usage or a new line put in that uses products that you haven’t catered for before,” observes Hilton, “so there’s this constant rightsizing of what’s held based on usage patterns, frequency of use and lead time to make sure that you are stocking the right products in the right quantities so that the engineers have the access and availability they need.”

Additional challenges

Downtime is one of the biggest challenges within manufacturing. As a recent RS and Institution of Mechanical Engineers survey reveals, scheduled maintenance leads to more than 18 hours of downtime per week at an average cost of $118,000. The impact of unplanned downtime is even higher, averaging almost 20 hours per week at a cost of more than $126,000 (read more about the Industry in Motion report).

In the food industry, there is an additional cost if ingredients go to waste because production is disrupted. As noted, raw materials, particularly perishable goods such as dairy products, often have a short shelf life. This makes minimizing downtime even more important. “Downtime has a massive impact on the food manufacturers,” says Hilton. “It definitely affects them more adversely than other industries.”

Understanding that the client’s top priority is to avoid stoppages shapes the entire approach to managing MRO. RS Integrated Supply therefore spends a great deal of time establishing the right stock levels for clients’ operations. “We endeavor to not be out of any part that can shut a line down,” says Kimmel of his client. “They’ll have a shutdown occasionally to clean everything out and sanitize but as a rule they run 24/7. It’s our job to keep them up and running and ensure everything is maintained at the stock levels they need.”

RS Integrated Supply also prioritizes operational excellence so client maintenance and engineering teams can quickly and easily access the products they require. “There’s optimization of inventory held in the storeroom. We identify the products, label the products, and make sure their specification is correct,” adds Hilton. “And we have a system that allows the engineers to find what they want and where it is very quickly.”

“There are lots of ways of ensuring accessibility and availability,” he continues. “We offer services such as kitting, too. If a client knows they’re going to change certain parts of a machine at the weekend and has a bill of materials they require, we can put these into kits and have them ready to open at point of use.”

Problem solving and savings

Collectively, these efforts to reduce downtime and right-size inventory levels create enormous value for manufacturers, including significant financial savings. Among the key performance indicators (KPIs) set by the food manufacturer that Kimmel works with is an annual cost saving target of 3% on MRO stock and a goal of $100,000 annual savings on inventory optimization.

Drastically reducing the time spent on handling MRO generates cost savings too. At a UK food manufacturing client, for instance, by consolidating thousands of purchase orders and invoices with hundreds of suppliers into a single invoice, RS Integrated Supply saved millions through cost avoidance. “The big benefit they saw was the transactional benefit, the managing of those transactions on their behalf,” says Andrew Perry, Senior Vice President of Operations for RS Integrated Supply.

By outsourcing MRO, manufacturers in food and other sectors can take advantage of financial savings as well as the freedom to focus on core tasks while knowing that a trusted partner is meeting KPIs on non-core functions – and dealing with any problems that occur in process.

Poor weather conditions, for example, can be an issue for facilities in remote locations. “Wintertime is a killer here,” states Kimmel when talking about meeting the on-time delivery KPI at a rural site. “We’ve had storms where we got four feet of snow in a day and a half. It’s not uncommon where this plant gets snow every other day in the winter, so trucks get stopped, planes get stopped, airports shut down.”

RS Integrated Supply is present to manage these situations and find solutions. “Don’t make your problem my problem,” says Kimmel, a statement that encapsulates why manufacturers in the food industry and beyond engage with external providers to handle their MRO requirements.

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